Are Rising Rents a Blessing in Disguise?

February 24, 2012

Rising rents may be just what the doctor ordered for home sales, according to the MBA.

The news cycles have been awash in reports the last six months on the growing demand for rental properties in the U.S., but too often, renting’s success has been presented as housing’s loss, a creation of the post-2008 market that signals a new dawn for homeownership in America.

New data from the Mortgage Bankers Association (MBA), though, paints a different picture, one where rising rents – a result of the exploding demand for rental units – will actually be a boon for the housing market, particularly for home sales.

According to Jay Brinkmann, MBA’s chief economist, the rising cost of renting (derived from a recent statement by Equity Residential), coupled with a surprisingly low number of renters who intend on renewing their leases (just 60 percent, according to a Kingsley Associates study), could equal a strong demand for housing when the weather warms in the spring.

“This means we might see a spring season better than the numbers are predicting,” Brinkmann said at the MBA’s mortgage servicing conference in Orlando, Fla., according to a HousingWire piece.

Brinkmann predicts sales of single-family homes in the second quarter to reach 4.39 million, while Mike Fratantoni, vice president of economics and research at the MBA, was also optimistic in his projections for housing, predicting a 10 percent increase in home sales in 2013.

Above anything else, though, Brinkmann said that housing’s performance will rely on how the overall economy performs in 2012.

“Everything is going to be based overall where the economy goes,” he said. “This is going to be a slow year. There are a number of headwinds we’re facing in terms of economic growth.”

Brinkmann also said that though homeownership is at a 14-year low following the housing boom, analysts are looking at the wrong set of data when they look at how housing has fallen; rather, he thinks the more appropriate study is how homeownership rates rose as much as they did during the boom.

“The question is not how did (homeownership) fall, but how it got so high in the first place,” Brinkmann said.

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